Settlement Vultures: NFL Edition

On July 12 I wrote about predatory structured settlement purchasers who buy out periodic payments to the disabled–those who need the funds over their lifetime–for 30-40 cents on the dollar. On July 16, the New York Times published a story entitled, “After N.F.L. Concussion Settlement, Feeding Frenzy of Lawyers and Lenders.” The article describes predatory sales pitches to former NFL players “who stand to receive checks from the largest legal settlement in sports history, a pool of money that may top $1 billion for retirees who sued the league for lying to them about the dangers of concussions as they got their heads pounded on the field.”

The stench of $1 billion has attracted lenders offering tens of thousands of dollars that would be paid back from the settlement payouts–commonly called “lawsuit loans” or “pre-settlement funding.” All they ask in return is 40% interest, which can completely consume any recovery from the settlement, according to the article.

Lawsuit lending is the “before” equivalent of structured settlement purchases, and often preys on a person’s desire for immediate gratification, or worse, their need of funds for healthcare or other essentials, even though there may be far more financially sound solutions.

This type of lending against a settlement payout is part of a legal but largely unregulated business focused mostly on victims in personal injury cases. The loans, though, have potentially devastating trapdoors, most notably the high interest rates that kick in immediately after money is advanced, and can cut deeply into the sum a player might ultimately receive in a settlement.

Some financial watchdogs accuse the lenders of preying on people who are sick or who, in the case of the N.F.L. retirees, have memory problems or other cognitive ailments that could mean they cannot fully grasp the terms of the loans, which often require the players’ lawyers to provide consent.

Whether before a settlement or after, there are numerous companies waiting to prey on those in the greatest need, and those who are least able to protect themselves. Sadly, it works.